Hedge fund fires salvo at Ohio REIT

Tim Loh

Updated 8:46 pm, Wednesday, June 4, 2014

Land & Buildings, a Stamford-based hedge fund firm with a history of activist moves, is calling on an Ohio-based apartment-building manager to sell itself -- potentially to Land & Buildings, which holds a minority stake in the company.

Greenwich's Jonathan Litt, who founded Land & Buildings in 2008, said in an open letter Tuesday to the board of Associated Estates Realty the company's "high-quality, high-growth" apartment portfolio is not best-suited for public markets.

He asked to meet with board members for "a full review of remaining strategic alternatives."

Land & Buildings, which moved from Greenwich into Stamford's Landmark Square earlier this spring, invests in real estate investment trusts and related companies.

Litt was not available for comment Tuesday afternoon.

In his three-page letter, Litt wrote Associated Estates' stock had traded at least 20 percent below its aggregate net asset value since 2000. He said the company needs a shakeup of its board, whose average tenure is more than 14 years.

"Shareholder value can best be maximized through the sale of the company," Litt said in the letter, posted on the company's website.

Shares of Associated (AEC) slipped 14 cents, or 0.8 percent, to $18.16 on Wednesday in New York, after falling 5 percent on Tuesday.

The company's portfolio includes 50 apartment communities, or 12,898 total units in nine states, according to its website.

Litt wrote Associated's lackluster equity value could only be fixed by going private. He based the assertion on several factors, including the company's relatively small size compared with its peers, its Midwest market focus, and its "outsized development exposure."

Last year, Land & Building made a bid for West Coast apartment-building manager BRE Properties, Litt noted in the letter. That company eventually was bought by Palo Alto, Calif.-based Essex Property Trust for $4.3 billion in cash and stock.

And following that, "shareholders saw their BRE shares trade to (net-asset value)," Litt said in his letter.